Agents are more likely to under-declare taxpayers' income, say
auditors
14 October 2010
Professional tax agents are more likely to
under-declare their clients' taxable income than are unrepresented
taxpayers, according to a report by the government's National Audit
Office.
The NAO analysed a sample of about 5,000
self-assessment returns filed for the 2004-05 tax year by both
represented and unrepresented taxpayers.
It found that 37 per cent of returns filed by
agents contained incorrect under-declarations of tax (resulting
from error, failure to take reasonable care, or evasion, as defined
by HM Revenue & Customs). The comparable figure for returns
filed by unrepresented taxpayers was 26 per cent.
The report admits that one reason for the
difference is that represented taxpayers often have more complex
affairs. But it goes on to say that "the analysis indicates that
paying for professional help is not without risk for a
taxpayer".
HMRC estimates that 65 per cent of
self-assessments are filed by third parties - amounting to about
43,000 professional advisers. On these figures, the NAO reckons
that GBP2.6-10.5 billion of tax revenues could be lost because of
underpayments by people helped by a tax adviser.
The NAO report, delivered yesterday to members
of parliament, recommends that HMRC should focus more strongly on
enforcing the compliance of agent-represented taxpayers, and on
"better targeting of poorer tax agents".
But the Institute of Chartered Accountants of
England & Wales immediately criticised the controversial
findings, which it said were not justified by the survey's
results.
Frank Haskew of the Institute's Tax Faculty
pointed out that the data used did not distinguish between
professionally qualified and unqualified tax agents; and that
represented taxpayers had on average 13 times the tax liabilities
of unrepresented ones. Nor did the survey look at overpayments.
"Under-declarations for represented taxpayers
represent a much lower proportion of their total tax liability",
noted a spokesman for the Chartered Institute of Taxation. He added
that the report had failed to look at HM Revenue & Customs' own
error rate.
Sources
NAO
ICAEW
Accountancy Age
Accountancy Age (2)